The AEMC has extended the timeframe for finalising a compensation threshold rule that applies to directed and affected participants when AEMO intervenes in the market. This will enable the Commission to align the final determination with a related rule change request from AEMO on the application of compensation in relation to interventions which was initiated today. Final determinations on both rule change requests are due on 19 December 2019.

When AEMO issues a direction, it provides compensation to participants which are directed to operate. AEMO  also provides compensation to participants which are “affected” by the direction, meaning they are dispatched differently as a result of the intervention.  Affected participant compensation is also payable when AEMO intervenes in the market by activating the reliability and emergency reserve trader (RERT).

A directed participant is generally entitled to formula-based compensation and may claim additional compensation if that amount is insufficient to cover its net direct costs and lost revenue. Affected participants are also entitled to automatic compensation to put them in the position they would have been in but for the intervention.

Currently, the National Electricity Rules include a $5,000 per trading interval threshold which limits the payment of compensation both to and by affected participants. The threshold also applies to claims by directed participants for additional compensation.

On 15 August 2019 the Commission published a draft rule to amend the compensation threshold for directed participants so that it applies per direction and not per trading interval. This means directed participants will be able to recover the costs they incur when providing a service under direction.

However, the draft rule did not change the threshold as it applies to affected participants. This was because, in the final report of the Investigation into intervention mechanisms in the NEM published alongside the draft rule, the Commission recommended narrowing the circumstances when affected participant compensation is payable – meaning it would not be appropriate to change the threshold in a manner that would increase the payment of affected participant compensation.

Consistent with the final report recommendation, AEMO has now submitted a request to change the rules so that affected participant compensation is only payable when interventions trigger intervention pricing in accordance with the revised “regional reference node test”. This affected participant compensation rule change request is being progressed using the expedited process and a final rule is due on 19 December 2019.

AEMO’s recent request means that the Commission can now determine how the compensation threshold should apply to both directed and affected participants. However, this requires delaying the finalisation of the compensation threshold rule change to align it with the timeframe for the affected participant compensation rule change. Both final determinations will now be published on 19 December 2019.

This work is all part of the AEMC’s system security and reliability action plan.


Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817